Wall Street yo-yos again
Poor morning followed by sharp turnaround that ends with gains overall
Wall Street rebounded on Tuesday, and the S&P 500 more than made up all its losses from the day before, after stocks pinballed through another day of erratic trading.
The S&P 500 climbed 1.3 percent, led by energy producers and other companies whose profits would benefit greatly from a strengthening economy. It was a sharp turnaround from the morning, when the index was down 0.9 percent, and from Monday’s last-hour slide after California shut bars and reinstated other restrictions amid a jump in coronavirus counts.
The Dow Jones Industrial Average also erased an early loss to end the day at 26,642.59, up 556.79 points, or 2.1 percent. Big techoriented stocks lagged behind, though, in a turnaround from their remarkably resilient run through the pandemic. That held the Nasdaq composite to a more modest gain of 97.73, or 0.9 percent, to 10,488.58.
The S&P 500 added 42.30 points to 3,197.52, and six out of seven stocks in the index were higher. The move left it 0.4 percent higher for the week after two yo-yo days.
After the market closed, shares of Moderna jumped in after-hours trading after a COVID-19 vaccine it’s developing with the National Institutes of Health revved up people’s immune systems just the way scientists had hoped. The experimental vaccine will start its most important step around July 27: a 30,000-person study to prove if the shots really are strong enough to protect against the coronavirus.
Tuesday’s unsettled market moves came as earnings reporting season kicked off. Three of the
nation’s biggest banks painted a mixed picture of how badly the coronavirus pandemic is ripping through their businesses.
“The earnings season is off to a very guarded start,” said J.J. Kinahan, chief market strategist at TD Ameritrade.
He pointed to cautious forecasts from companies that see the economy possibly taking a step back because of worsening COVID-19 trends, or at least taking longer to recover than expected.
“The fact that they are prepared for bad scenarios is helping to give the market a little confidence,” he said.
Like the broader market, financial stocks drifted between gains and losses for much of the day before turning higher in the afternoon. Jpmorgan Chase, Wells Fargo and Citigroup said they collectively set aside nearly $27 billion during the second quarter to cover loans potentially going bad due to the recession.
But investors took very different approaches to each of them. Jpmorgan Chase rose 0.6 percent after it said it made a record amount of revenue from April through June. Its profit for the latest quarter also beat analysts’ forecasts, even though it roughly halved from a year ago.
Wells Fargo, though, dropped 4.6 percent after it said it expects to cut its dividend. “Our view of the length and severity of the economic downturn has deteriorated considerably,” CEO Charlie Scharf said.
Citigroup fell 3.9 percent after CEO Michael Corbat said its overall business performance was strong last quarter, though net income dropped 73 percent from a year ago largely due to the $7.9 billion it set aside for loans potentially going bad.
Delta Air Lines lost 2.6 percent after its earnings and revenue for the latest quarter fell short of Wall Street’s already very low expectations. The pandemic is keeping fliers on the ground, and Delta’s passenger count plunged 93 percent during the quarter from a year earlier. CEO Ed Bastian said it could be two years before the airline sees a sustainable recovery.
Stocks have been mostly churning in place since early June. That’s when the S&P 500 pulled back within 4.5 percent of its record high set in February, after earlier being down nearly 34 percent. The index is now 5.6 percent below its record.
Pulling stocks higher has been a budding economic recovery, with the job market, retail sales and other measures of the economy halting their plunge and beginning to resume growth. Underlying it all is massive aid for the economy from central banks and governments around the world.
But pushing stocks down are accelerating coronavirus counts in hot spots around the world, which threatens to halt the recovery just as it got going. California demonstrated on Monday how dangerous that can be when the governor of the country’s largest state economy ordered indoor dining and other economic activity closed.
The worry is that the continuing pandemic could push states across the Sun Belt to roll back reopenings of their economies.
That’s why COVID-19 trends — along with the potential for more aid for the economy from Congress — will matter much more for markets in upcoming weeks than what companies say about their second-quarter results, said Keith Buchanan, portfolio manager at Globalt Investments.
“The progression of the virus should still be front and center for what is dictating and going to continue to dictate our prospects for economic growth going forward,” he said.
In Europe, France’s CAC 40 fell 1 percent, and Germany’s DAX lost 0.8 percent. The FTSE 100 in London added 0.1 percent.